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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Costs that change with the level of output. If output is zero - so are TVCs.






2. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






3. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






4. Es = (%dQs) / (%dPrice)






5. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






6. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






7. MUx / Px = MUy/Py or MUx/MUy = Px/Py






8. Ei = (%dQd good X)/(%d Income)






9. The price of a good measured in units of currency






10. The output where ATC is minimized and economic profit is zero






11. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






12. The additional cost incurred from the consumption of the next unit of a good or a service






13. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






14. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






15. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






16. Ed = (%dQd)/(%dP). Ignore negative sign






17. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






18. Ed = 8 - infinite change in demand to price change






19. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






20. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






21. The total quantity - or total output of a good produced at each quantity of labor employed






22. The sum of consumer surplus and producer surplus






23. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






24. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






25. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






26. Occurs when LRAC is constant over a variety of plant sizes






27. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






28. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






29. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






30. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






31. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






32. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






33. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






34. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






35. A good for which higher income decreases demand






36. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






37. A good for which higher income increases demand






38. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






39. 0 < Ei < 1






40. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






41. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






42. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






43. Ed > 1 - meaning consumers are price sensitive






44. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






45. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






46. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






47. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






48. The practice of selling essentially the same good to different groups of consumers at different prices






49. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






50. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand







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